AQA A-Level Business: Strategic Position and Direction

Read the case study below and answer the question that follows.

The following case study was written for this exercise.

Aldermoor Foods plc is a fictional UK food manufacturer founded in 1998 and listed on the London Stock Exchange since 2014. Its 2025 revenue is £640m and its operating margin is 8 %. Aldermoor's business is built on a single core competence: a chilled-ready-meals operation in which it has spent twenty-five years building deep recipe-development skill, tightly controlled cold-chain logistics and trusted own-label supply relationships with the four largest UK supermarkets, which together account for 86 % of its sales. The UK chilled-ready-meals market grew at 6-9 % a year between 2015 and 2021 but has slowed to 1-2 % a year over 2022-2025 as the cost-of-living squeeze pushed shoppers towards cheaper frozen and own-cook alternatives.

The board wants to restore higher growth and has commissioned a strategic review. The review concludes that further market penetration in chilled ready meals is reaching its limit, because Aldermoor already supplies most major UK grocers and the category itself is barely growing. It sets out two alternative directions. The first is market development — taking the existing chilled-meals range into mainland Europe through a major German and French retailer. The second, favoured by the chief executive, is diversification — acquiring Greenfell Wellness Ltd (a fictional £55m-revenue maker of vitamins and sports-nutrition supplements) for £140m, entering a product category and a set of pharmacy and online customers in which Aldermoor has never traded. A SWOT analysis prepared for the board lists Aldermoor's chilled-meals expertise and supermarket relationships as strengths, its 86 % dependence on four customers as a weakness, the fast-growing wellness market as an opportunity, and intensifying competition and supermarket buyer power as threats. Aldermoor's gearing is currently 30 %; the Greenfell acquisition would raise it to about 64 %.

Question: Evaluate whether Aldermoor Foods plc should pursue diversification, by acquiring Greenfell Wellness Ltd, as its strategy for growth. [25 marks]

Read the case study below and answer the question that follows.

The following case study was written for this exercise.

Northwind Logistics Ltd is a fictional UK road-haulage and warehousing company with revenue of £210m and an operating margin of 4 %. It competes in the general palletised-freight market, moving standard pallets between manufacturers, distribution centres and retailers. The market is fragmented, with dozens of mid-sized hauliers offering an almost identical service, and large national carriers also active. Northwind's three biggest customers are national supermarket chains that put their haulage contracts out to competitive tender every two years and routinely play carriers against one another on price. Diesel and driver wages, Northwind's two largest costs, are set by suppliers and a tight labour market over which the firm has little influence. New entrants can begin trading with a handful of leased lorries and a transport-manager licence, and digital freight-matching platforms are starting to let shippers book capacity directly. Northwind's managing director has asked a consultant to use Porter's Five Forces to judge the firm's competitive position before the next contract round.

Question: Assess the usefulness of Porter's Five Forces analysis to Northwind Logistics Ltd when judging its competitive position. [16 marks]

Read the case study below and answer the question that follows.

The following case study was written for this exercise.

Calderbrook Coffee Ltd is a fictional UK chain of 40 coffee shops with revenue of £30m. It operates in town centres alongside the large national chains, which compete largely on convenience and price. Calderbrook's owners are deciding which of Porter's generic strategies to pursue. They could compete as a lower-cost operator, or they could differentiate by offering speciality single-origin coffee, locally baked food and a distinctive store design that the national chains do not match. Market research suggests a segment of customers will pay noticeably more for a higher-quality, more individual coffee-shop experience, but that segment is smaller than the mainstream market. Calderbrook is too small to match the national chains' purchasing scale.

Question: Analyse two influences on Calderbrook Coffee Ltd's choice of competitive (generic) strategy. [9 marks]

The following data were written for this exercise.

Pennine Plastics Ltd, a fictional UK manufacturer, is appraising an investment in a new injection-moulding line. The line requires an initial outlay of £200,000 and is expected to generate the net cash flows shown below over its three-year life. The firm appraises projects using a discount rate of 10 %, with the discount factors given.

Year	Net cash flow	Discount factor (10 %)
1	£80,000	0.909
2	£100,000	0.826
3	£120,000	0.751

Using net present value (NPV), calculate the discounted cash flows and the NPV of the investment, and state whether Pennine Plastics should go ahead on financial grounds. [6 marks]

The following context was written for this exercise.

Thornbeck Tools Ltd is a fictional UK maker of basic hand tools sold to large DIY retailers, in a market where buyers see the products as broadly standardised and switch supplier readily on price. Thornbeck has invested in highly automated production and high-volume purchasing of steel.

Explain why a cost-leadership strategy might be suitable for Thornbeck Tools Ltd. [5 marks]

The following data were written for this exercise.

Using the same Pennine Plastics Ltd moulding-line investment, the project has an initial outlay of £200,000 and is expected to generate total net cash inflows of £80,000, £100,000 and £120,000 in Years 1, 2 and 3 respectively.

Calculate the average rate of return (ARR) for the investment. [4 marks]